諾和諾德 (NVO) 2008 Q1 法說會逐字稿

Thanks, everyone, for coming to the Novo Nordisk press results lunch.

In a world of pharma blow-ups, Novo's been a bit of a sanctuary, so we're very pleased to welcome you here.

And I'll hand over to Jesper to start the ball rolling.

Thanks.

I'm not sure I really like to be compared to a sanctuary.

It doesn't sound very dynamic to me but, anyway, I hope I can talk a little bit about the action we've developed in the first quarter, and then the momentum in our business.

Of course, speaking about momentums and the future, and where we're going, of course, this does involve forward-looking statements so you carefully look this one.

The way Mads and I have decided to divide our presentation is that I will cover highlights and strategy.

I'll do the first bit about sales.

Mads will take over on the Biopharmaceuticals and do the R&D, and then I will end off by financials.

If we look at the highlights for the first quarter, very solid, continued momentum in our business.

This actually marks the 24th quarter in a row where Novo Nordisk deliver, in local currency, double-digit growth.

In local currencies, this quarter was 15% growth, of course, driven by our franchise of modern insulin.

Modern insulin is accounting for approximately 70% of the Novo Nordisk growth.

Also, a very solid first quarter of NovoSeven growth coming from North America, and also, to some degree, from International Operations due to timing of tenders.

We still believe that the growth level for NovoSeven is probably going to be slightly lower for the full year.

Sales of Norditropin, very promising, at 17%.

A strong performance in North America.

We still are the only one with a liquid growth hormone, which can be stored at ambient temperature and in a disposable device, and that seems to keep the momentum behind our business.

Our North American franchise continued to be a key growth provider, but do note the difference between the local currency growth and the as reported.

A 14% negative currency impact is a reflection of the very, very significant decline we have seen from the U.S.

dollar versus the euro.

In terms of R&D, we would like to take this opportunity to confirm that we will file in both U.S.

and Europe in this quarter, and we will also file in Japan in the next quarter.

And I think that if we succeed with that, it will be a significant achievement for our R&D organization, as it's very, very rare that you have compounds being filed in all try out markets within two quarters.

In terms of the Pulmonary activities, following the discontinued -- or following the safety update on Exubera, requested by the FDA, by Pfizer, we have had to conclude that the risk-benefit ratio on the -- in the Pulmonary area no longer merited that we continue to invest in early-stage compounds trying to develop an inhaled version of basal insulin and, also, try to develop an inhaled version of GLP-1.

And, as a consequence, we have, in this quarter, decided to discontinue all our inhaled projects, and increased our charge for closing down the Pulmonary area from DKK300m this year to DKK500m, and then we will be completely out of Pulmonary.

Maybe Mads will expand a little bit on the reasoning and the thinking behind that.

We have achieved a marketing approval for NovoSeven, a room temperature stable version also of NovoSeven and that's, hopefully, going to expand further the penetration of NovoSeven.

And I think we've also filed for approval of that in the U.S., but not yet received that approval.

Sales, I've talked upon.

Gross margin is the key theme in this quarterly release; yet another quarter with a very solid performance.

We are, of course, being negatively impacted by the location of our production activities, with a prime weight in the euro zone and, as a consequence, we were, basically, more than 100 basis points in negative currency impact on our gross margins.

Still, we managed to deliver almost 1 percentage point improvement in gross margin over Q1 last year, although it was a relatively easy comparator.

In terms of operating profit growth, a promising 22% improvement driven by high growth in sales, limited development in our sales and distribution costs.

And then, finally, we have updated our guidance for the full year.

We have, in reported terms, had to reduce the guidance to now a level of slightly more than 20%, but that is solely compared to previously around 25%.

And the reason for that is that we have, compared to last time, an increased negative currency impact on operating profit of approximately 5%.

If you go back to January when we gave the guidance for 2008 first time, there, we said that we expected to have a top line effect which was going to be negative of 3.5%.

Now we have updated that through the currencies we have now and we say 6% negative.

So that is an increase in the top line effect of 2.5%.

And for Novo Nordisk you can -- as a rule of thumb, you can double the top line effect to get to the operating profit effect.

So 2.5% negative top line growth, as a consequence of the movement in currencies since January, that is giving us a 5% negative impact on our operating profit.

The other factor that is impacting operating profit is the development with the Pulmonary area, where we've increased this provision, or the cost we expected for closing down the Pulmonary activities by DKK200m.

On the other hand, and that's the reason why we say slightly more than 20%, we are improving our guidance for the local currency improvement in our gross margin, and now we're saying that that is going to improve by at least 100 basis points in this year.

And, on top of that, we are also slightly upping our sales guidance from previously slightly above 10% to now giving a range of 10% to 13%, and, in there, there is also probably a slight upgrade of our expectations.

So that is the key messages in this release, and then we'll dig into a bit more detail.

This one, I'm not going to dwell a lot on it because it's, basically, similar to the ones you saw at the full year roadshow.

I think what we have tried to highlight is that there is a clear distinction between the diabetes and the obesity pre-diabetes focus, and then the Biopharm franchise.

And where the Biopharm franchise is divided into two key focus areas; the Hemophilia area and the new Inflammation area, moving forward.

And, of course, basing that on our ability with proteins, on drug deliveries and, hopefully, being able to utilize the global commercial infrastructure that we have built up through the global penetration with our diabetes platform -- our diabetes franchise.

Our market share position, unchanged, with a 52% market share globally, and very solid positions worldwide.

No significant change either in terms of world insulin market growth, growing at around 6% and, of course, you also see -- in the world value charts you see a significant impact whether you are measuring it in U.S.

dollar or whether you're measuring it in euro.

From a U.S.

dollar perspective, a 19% growth in the insulin world value market and that has really been driven by the number of patients.

No new data there.

We then move into the individual products.

Interesting to see that we have a hard time keeping up with the diabetes franchise in Biopharm.

It's becoming ever more important now, 74%, and a 10% reported growth.

In local currency, we're seeing a growth of 16% and 80% of the growth coming from the Diabetes Care franchise, and especially from the modern insulin.

I should, when I have the chance here, mention on the OAD, that the OAD growth we had in first quarter was a bit out of trend.

There was a significant shipment to China in the first quarter, so, I think this growth level you should not anticipate from the OAD going forward.

There is a timing issue involved there.

Apart from that, I think it's a growth level of around 10% on Norditropin, high single digit on NovoSeven.

That is the ballpark growth you should anticipate.

The HRT market is remaining challenging and we continue to see the overall market in Europe for HRT product contracting, so it's not a Novo Nordisk specific issue.

Our market position is solid and slightly improving, but it's the overall market for HRT products which are highly challenging.

The penetration of our portfolio of modern insulins are developing very steady, in line with our plans.

You can see that it's becoming more and more evenly distributed and, in fact, if you look at the growth in the first quarter, it's actually Levemir which are just above NovoRapid in providing the highest proportion of the growth.

So they are all very important to us, and we believe that the continued investment in Levemir is well merited.

And you can also see from the sales label of NovoMix, that NovoMix will develop into a blockbuster for Novo Nordisk; $1b in 2008.

Levemir is probably going to beat it in 2009.

The conversion from modern -- from human insulins to modern insulins are continuing at a steady rate, and we are gradually improving our market share, primarily driven by ever-increasing market share in the basal segment with the roll out of Levemir globally, and where we have recently launched it in Japan as an important market.

And we have already now obtained approximately 10% of the -- or more than 10% of the Japanese basal market.

And, Lantus, as the main market leader, is having approximately 27% of the Japanese market.

So we've gotten to 10% within three months and I would anticipate we, within 12 months to 18 months, should be able to overtake Sanofi-Aventis in the Japanese market as the leader with the basal modern insulins.

And then, over to you, Mads.

Hello.

What I'll start by doing is really a quick walk through of NovoSeven and growth hormone, and then a little bit about the regions, before we go into R&D.

If we look at NovoSeven, we did have a growth of around 10% in local currencies.

Should say that in that is included a tender in Russia of a certain size, meaning that we are not guiding for 10% growth for the full year.

But it is a fact that North America continues to do nicely, and IO is really coming on board, NovoSeven-wise.

The split between use for the various segments of Hemophilia and other indications is norm, more or less as we have seen hitherto.

If we look at the growth hormone sales, they were actually also up 17% in local currencies, again, driven by North America contributing more than half of the growth driven, in particular, by the notion that we are still the only Company with a pre-filled liquid version in the NordiFlex.

And it is our anticipation, over the years to come, that we will strive for market leadership even though we today are some percentage points behind Pfizer.

Now, looking at sales by region, it is to be expected that North America and International Operations will be the predominant growth drivers, but what you are seeing here in this quarter is that more than 80% of growth came out of those two regions.

I think the IO situation, International Operations, has been positively impacted by some tenders occurring in the first quarter, giving a higher growth than we normally expect to see here, which is in the ballpark of 20% on a recurring basis.

But very nice growth in those two regions and you can now see that they, together, constitute a significant part of the total turnover.

On Levemir in Europe, we are continuously now increasing sales in the basal modern insulins segment to the extent that we're around 26%.

NovoRapid and NovoMix are doing well but in the, you can say, more mature segments.

We've been around for longer and, in total, we are now at 51% share of the total modern insulin sales in Europe, which is the highest that we've been, and still increasing.

In the U.S., the situation is also looking nice.

Last year we overtook Eli Lilly in terms of total insulin market share development, and the performance of the basal insulin Levemir is increasing at the 0.3% to 0.4% increment month over month; as you can see, now approaching around 10% of that segment.

If we look at the International Operations, or the emerging markets, we are able to continue a very strong performance with around 58% market share.

Important to note here is that the conversion from human to modern insulins is kind of right shifted compared to the try out market, and it's only now that we are starting to see significant markets such as China, and Russia, and others pinging up in terms of the conversion.

So it's very important, both to have the volume, but also continue to expand on the value side of these important strategic future markets.

With that, I'll give some comments.

And, before I show you the pipeline, which now does not include any Pulmonary project, I'll just give a few remarks on the decision to terminate, not only the [urks], but the general Pulmonary field.

What is it that has happened since January of this year?

Well, first of all, we have seen our competitor, Eli Lilly, also give up on the insulin field.

More importantly, we realize now that [GP] leaders, diabetologists, the people who should be the ones who actually drive enthusiasm for these products in the marketplace, have come to -- have the opinion that the benefit risk for this entire class is not one that they will go out and advocate for towards the GPs and others.

There is an overall negative sentiment that was further aggravated by the notion that Pfizer sent out the Press Release about the seven to one split between the primary lung cancer cases in patients using Exubera versus those who were on the standard therapy.

And this has caused us to reassess the entire situation, because the compounds we were working on were long-acting insulin in GLP-1, meaning that the resident's time in the lung compartment would be even longer, of course, for this compound than it would be in the case of Exubera.

So that the clear safety signal that has emerged would, if anything, potentially be aggravated by having long-acting compounds in the lungs.

And since we have very exciting research going on in other routes of non-invasive delivery, we feel that it's much more pertinent to have a benefit risk profile that is more increased on the benefit versus the risk side than is possible via the pulmonary route and, henceforth, refocusing our resources into other means of non-invasive delivery.

With that, we have the existing pipeline as we see it today, driven, of course, by a number of isolated proteins.

All these guys down there are via our unique technology of isolation putting on fatty acids to define protein-engineered molecules, such as insulin and GLP-1.

And, as Jesper has already hinted at, in the case of Liraglutide, the situation is that we will be ale to put back a compound to the FDA and EMEA aiming for approval already this quarter, after having had discussions previously this year both with the FDA and with European medicine agencies.

In terms of obesity, we are still on track to enter Phase III trials before the end of the year with Liraglutide, and recruitment for the modern insulin successors, 1250 and 5401, which are to supersede Levemir and NovoMix, one day, if and when they come to market, we have recruited somewhat ahead of schedule and will, actually, over the next less than a year, be able to communicate the full blown results from the Phase II trials in both Type 1 and Type 2 diabetes.

Later this year, we anticipate to enter Phase II for the once-weekly GLP-1.

Now, the market, our view is that even though the insulin market is still smaller than the [tapid] market, the OAD market, this is only for the time being; it has historically been so.

But what we are seeing is an as expected growth of the insulin market people, as Jesper has alluded to, get more diabetes, they live longer, they get earlier diagnosed and the guidelines are becoming more assertive as time goes by, and all.

As we have seen it for JANUVIA and other compounds, they tend to have a lifespan of only one to two to three years on an individual patient basis.

So we actually believe that insulin and GLP-1 are the two future exciting growth areas of diabetes, in particular Type 2 therapy, and they are the ones that Novo Nordisk is focusing strongly on.

The GLP-1 market cannot be assessed on the basis of the first entrant into the market, Byetta, for obvious reasons.

It is a question of having a fully efficacious, long-acting compound that has both a convenience and efficacy benefits to the patients, and that will really determine the future uptake of the entire trial.

In terms of the Haemostasis portfolio, Jesper mentioned the notion that this very patient-friendly heat stable, a version of Factor VII, which is portable, can be carried around, used on demand as soon as you have the first sensation of a bleed occurring.

It's approved in Europe and we expect, later this year, also approval in the U.S.

It was actually approved last week in Europe.

We should also highlight again that later this year, I would say over the next few months, there will be the so-called pre-planned utility analysis for NovoSeven in trauma, in which we are assessing the statistic analysis plan that was built into Phase III, based on real-life mortality data from the Phase III study, really looking into is it futile to continue.

And, if not, you can say we will of course terminate and publish the data, but if we continue we will do so with a higher likelihood of having a positive outcome which is the whole, of course, reason behind the exercise of doing a fertility analysis and taking the consequences.

So that will be very exciting.

We are also progressing the Factor VII analogues and other clotting factors, both in the clinical and pre-clinical pipeline, and it is our belief today that NN1731 is destined to become the successor to NovoSeven as on-demand therapy, whereas, the long-acting analogue is our first entry into the market expansion that will be emphasized by the use of prophylactic Factor VII therapy to, let's say, avoid bleeding from occurring.

On the other Biopharm, we are in the process of out-licensing the cancer portfolio.

But, on a more positive note, you can say that over the next couple of months, or three months or so, you should expect to get an update that will show that the first antibodies, protein-based therapies, for auto-immune disease, or inflammation in general, will come into Phase I clinical trials, and the overall pre-clinical development, in that arena, is also looking promising.

Finally, I should say on the growth hormone in dialysis, we are in the process of recruiting patients.

Obviously, this is a lengthy procedure.

It's a big study; 2,500 patients, mortality endpoint, patients who are poor off and so on.

So it is an exercise that will be ongoing in the time to come.

With that, Jesper, over to you.

Yes.

The P&L, I've already commented on the sales development in terms of gross profit.

I probably should add that the development in our gross profit is, of course, highly dependent upon currencies; I've mentioned that.

And we have a 1.1 percentage point impact.

I'll just cover it on this slide.

1.1 percentage point negative impact on currencies, but the improvement we have seen in Q1 has, primarily, been related to an improved production efficiency in our bulk facilities, which probably accounts for two-thirds of the production economy improvement, and approximately one-third can be related to the improvement in our billing lines, which are more globally distributed.

And then the second element, and probably accounting for a third of the overall improvement, that is relating to better prices, led in the U.S., primarily coming from increased list prices.

And those are the key factors behind the development in our production economy.

And that was the basis for us improving the guidance through an underlying improvement of at least 100 basis points, from previously 50 to 100 basis points.

Then just to go back and follow some of the other lines.

Sales and distribution costs, please bear in mind that we, in the first quarter of 2007, had a charge in the ballpark of DKK200m related to the anti-dumping issue we have ongoing in Brazil.

So that's why you have an unusually high level there.

I would anticipate it will be in the 29% plus for the full year, and the swing factor there is a little bit what do we decide to do in terms of U.S.

sales force for Liraglutide and, clearly, cost in relation to beefing up our sales force in the U.S.

could hit especially Q4 of 2008.

Research and development costs at a 17.5% level.

We have previously guided for a full-year cost level of around 17%.

I think you should anticipate that we'll probably be now -- be at the 17.5%, maybe 17.5% plus, for the full year as a result of the additional DKK200m in cost for closing down the set up we had in Hayward, California as the prime reason for this guidance level.

And admin expenses in the 6% ballpark.

I think those are the key elements I'd like to touch on here.

Yes.

I would probably also just note on tax that we had a low overall tax rate last year, and that was following the reduction in the Danish corporate tax rate that was implemented in the second quarter.

And that's why there is a higher tax rate in Q1 2007, but it will drop to a lower tax level.

But I think the 24% that we are seeing in Q1 is a good guidance for the full-year tax rate.

Of course, the key factor impacting our overall P&L structure is the development in the dollar.

But I've also learned over the last six months that there is a very clear correlation also now with the British pound, and that has actually become a very negative factor for Novo Nordisk the last six months or so.

We've highlighted here how the currency relation is.

We have reduced the number of U.S.

dollar-related currencies and, here, to be focusing on CNY and Canadian dollar, which are the biggest.

But, of course, it's always a little bit risky to say that currencies are U.S.

dollar-related but there are, of course, included in our International Operations, a number of currencies which have a correlation with the U.S.

dollar but not a perfect one.

So you only have two there, with the Chinese as the key one.

If we look at the outlook, as I said in my introduction, we have now given a range for our sales growth of 10% to 13%, updated our currency impact to now around 6% for the full year, a negative currency impact.

I think I've already touched on the operating profit growth expectations.

I think, importantly, we upgraded the guidance for the underlying, and that's really a reflection of the better production economy, and also the slightly higher sales growth which is then getting us close to a 25% growth.

Net financial income expected at DKK600m, and that is anticipating very significant hedging gains in the last -- next three quarters.

We had, at the end of March, almost DKK1b in mark-to-market value of our portfolio of forward contracts on currency, plus currency options.

And those contracts will be recorded as the cash flow materialized, with the predominant part materializing in 2008, and a little bit in the first two quarters for 2009.

And the only other item which has been changed has been our guidance for capital expenditure.

We had anticipated we would do some investments in relation to the Pulmonary set up.

This will no longer be necessary, and we have reduced our expected investment with DKK500m, now taking it down to DKK2b for 2008.

And, as a consequence, our cash flow with everything else, be DKK500m better, or now estimated at around DKK8b in free cash flow for the year.

And also note, of course, the currency rates that we have been used to assume what is the rate going to be for the rest of the year, these are very close, slightly actually below, the current spot rate following the Fed cut last night.

So this is Novo Nordisk; unchanged strategic position, number one position for our key products, except for growth hormone where we're number two.

We have a key growth driver in the portfolio of modern insulin and, I think also very importantly, Mads noted it, that we are recruiting in Phase II, and we expect to report within a year on the portfolio of the second generation of our modern insulin, hopefully, being able to move those into Phase III when we get towards the end of 2009, early 2010.

And then have a very promising GLP-1 compound, filing now for the diabetes indication and, hopefully, being able to expand that into pre-diabetes and obesity, going for the more severe types of obesity as the target segment for Novo Nordisk.

growth hormone; continue to try to expand the indication so that we can have a good dialogue with the key endocrinologists around the world, and grow our presence with growth hormone, and continue to invest in North America.

North America will be the key opportunity for us with GLP-1 and, hence, you should expect us to continue to expand our presence and invest in our sales and marketing both in the U.S., and also invest in China.

This is a key growth market, contributing approximately 25% of the overall International Operations for Novo Nordisk, and we are continuing to see growth in the ballpark of 40% coming from China.

And then, we believe, with the overall portfolio, and also as alluded to by Mads, the second generation both of our insulin and the second generation of NovoSeven, and also our long-acting growth hormone, is giving us a lower than what is industry norm today in terms of risk of patent expiration.

So, with that, we will take questions now.

Craig Maxwell, JP Morgan.

Just a couple, if I can, to start off just on the GLP-1 market.

And -- but Byetta, obviously, isn't doing quite as well as maybe people expected, or it hasn't taken off that quickly.

Just some key reasons how GLP-1's different from that?

We know some of the profile but, in the market, how that would be perceived.

And then maybe a couple of differences on the longer-acting ones.

I know you've got some strong views on that.

And then, is it not inevitable that the take-off will be slow for this type of drug if it's -- you have to finish an OAD and you're not going to come back from insulin.

Is the patient opportunity for a quick take-off really there, or should we just be slightly slower expectations?

And lastly, I don't know if I caught you right, did you say the key opportunity for GLP-1 is the U.S.

or a key opportunity?

If it is the key opportunity, I was wondering why that would be, because I would have thought this would be a huge drug outside the U.S.

Right.

Well, first of all, I mean Liraglutide is well suited also for Asian styles, at least, some of the best data we have are from Japanese individuals.

We are doing Phase III in China.

I think, Jesper, you just alluded to, in numeric terms, the U.S.

being the biggest.

If I very quickly look at how is the -- Byetta doing, the split in how patients are using it is roughly 50% in combination therapy with different orals, and the other 50% split between either a combination of insulin or, for that matter, monotherapy, and even though monotherapy is not on the label.

So you can see GLP-1, at least based on Byetta, are compounds as also estimated from [Elite] 1, 2, 3, 4, 5 studies, can be used all over the place from first line therapy down to -- up to and including combination with insulin.

But, that being said, to displace metformin from the first line therapy status, it is a tablet, it is cheap, it has a track record for more than 50 years, you will probably need to either see really disease-modifying properties, i.e., [betasol preservation] in the long term, in humans, not only in animals, to really hope for having a first line general positioning.

Does it mean that [Lira] will not used as first line therapy?

No, of course, it will be, but it will not be the primary positioning.

The primary positioning must be as a really fast and efficacious and sustained HbA1c lowering agent in patients who are failing on metformin therapy, and thereafter.

Implying also, combination therapy with different orals, as we've seen in Elite 1, 2, and 4, but also, ultimately, at the end of the day, in combination when patients still [rely] of course with insulin [for therapy] Levemir.

So what you can say is why is Byetta not really representative of how we see the GLP-1 market, obviously, because the data Byetta has in efficacy terms are not much better than you see for glitazones and DPP4 inhibitors.

It is shy of 1 percentage point in all the Phase III studies that have been completed, which is very different from Liraglutide, which basically covers the 24-hour cycle of the day and night.

Whereas, Byetta typically acts in 12, 13, 14 hours, even in spite of being injected on a twice-daily basis.

So I think Liraglutide -- and that is kind of an important task for us to take upon ourselves, will be the first fully active, very convenient GLP-1 product that will really pave the road for a more general GLP-1 market that we'll only see how big will become in the future.

But based on efficacy and convenience, I think this is a very exciting market.

And Liraglutide, as you I think quoted me correctly on that one.

I do have strong views that Liraglutide is the best-in-class molecule [available] today because it is an endurance, long-acting molecule for [1C].

That being said, we and others have once we [cleared] offers in the pipeline that will be exciting to see how it pan out.

But just to clarify on my comment on the U.S., if you look at on a three to four-year horizon where the market opportunity is, just because of the approval timelines, the reimbursement challenges that you will be facing in Europe, the timelines of approval and price approval in Japan and the whole regulatory process in China etc., that will, for all practical purposes, leave the U.S.

on a three to five-year horizon as the prime opportunity.

So that was the basis for that.

So, it was right, I said the prime opportunity.

And maybe we should offset, which I know you do on occasions, that this is probably not a JANUVIA take-off kind of product because it is a once daily injectible, so you should probably more be looking to the Lantus kind of situation with a gradual build up of the very strong [build].

And also, I think, actually, the Byetta launch, if you look at the first 18 months, I think it was a quite well executed launch, so I think the references you need to make is for an injectible and then, hopefully, we can be able to demonstrate that a high proportion of the patient on Liraglutide will be able to stay on Liraglutide and we will regulate it blood sugar-wise.

I think that is also important.

It's my understanding that one of the challenges that seems to be with Byetta is the duration of treatment for patients, that they are not staying for as long as one would hope.

And, of course, if you have to replace patients all along, then it is challenging to obtain significant growth.

So we'll have to demonstrate that Liraglutide, with the 24-hour cover it has, can provide on a sustainable level, a very good blood-sugar regulation, and combined with that the weight effect, and a positive impact on solid blood pressure.

I've got three questions.

On Liraglutide, or associated with it, who makes the key decisions to start someone on an injectible?

It's easy for a GP to put someone on a tablet, but do you need to go to the specialist?

Are they going to be the key people to initiate that switch?

And, as you mentioned the comment about persistence on Byetta not being there, is that a problem if the specialists say it's a great idea, then the patient goes back to the GP, who hasn't actually thought it was a great idea, and doesn't encourage and keep encouraging the patient to stay on?

Is that going to be a similar problem for you?

The second question's about human growth hormone.

We've heard a lot from companies saying that they're getting their act together, and we will be see proper biogenerics.

Given that you take this product -- a few people take it for quite a long time, are we just missing the fact that new patient starts are, perhaps, going to these generics and it'll take a while before it comes through?

Can you just tell us a little bit about that new patient start experience?

And the final question's to look at the back end of the lifecycles.

Can you give us any more comfort as to how slowly we should expect erosion for things like the analogues when they go off patent?

Is there anything, any new experience, I don't know, Poland or anything like that, where you can update us to give us the comfort that your base business is going to be really stable, and we're just going to be adding Lira on top?

Well, Mads, if you start off with the patient movements on Lira, and then I'll take the growth hormone and the modern insulins, [by our similar competition].

Yes.

Those were tough questions.

I'll try, if I can remember, the question surrounding Lira.

Now, a very important thing, one, is the distinction between insulins and GLP-1.

In-house, you prescribe them and educate about them.

The other is the distinction between the role of the specialist and the GP, and these are the things you are hinting at.

So, if I first can give a notion about the difference between starting on an insulin and on a GLP-1, basically, Liraglutide is a product where you don't titrate from day-to-day up and down according to [blood] glucose values.

You titrate only one time, typically, and that would be after one week where you click up to the next dose.

So the whole education about glucose monitoring and titrating up and down, which the GPs either don't like, or don't understand, or think it's too tedious, not all but many, is something that is an important distinction that I believe will make Liraglutide much more of a GP-friendly product than the insulin.

When that is said, I should also add that Novo Nordisk has the key belief that the worst thing you want to do in this world is to start out with a hefty [BTC] kind of campaign as we actually saw it in the case of the Pfizer in Exubera.

What you need is a chronically -- this is a chronically progressive disease that you have for the rest of your life, so you really need to have a strong liaison with those who are the people you need.

You need to take them on board, have them embrace and endorse the product from the beginning and, from then, kind of, you have the education going into the GP circles, i.e., starting out with really having all the diabetologists, the endos, the whatnots, who are specialized in diabetes therapy, take this product, use it, and from there you will expand into [GP] territory.

It, basically, means that a lot of the pre-launch awareness programs we are doing right now target specifically specialists, so that they have to be aware, not only about the role of GLP-1 in the future in this area, but specifically why Liraglutide is the way to go.

Does that mean that they're going to be the main prescribers?

Ultimately, no.

The main prescribers, at the end of the day, will be the GPs.

This is also why we are assessing the size of the sales force and we will get back on that issue, because we don't want to lose momentum on the modern insulins, of course.

But there's no doubt that you need, in the first wave, really to have the specialists on board, and that is an exercise you start even before launch.

(Microphone inaccessible) specialists, say in the U.S., on hands-on experience of Lira versus how many specialists have had hands on experience of Byetta at the time of their launch, just to give us some idea of whether you're starting from the same knowledge base?

I think when we benchmark, what we want to go up against, we're looking at successful recent launches, including that of the [quincing] JANUVIA in terms of what we need to educate and how we get this in the awareness, and the awareness has to be very high.

It has to be most of the specialists know exactly what Liraglutide and, hopefully, soon to comprehend what that stands for.

So -- but you can say the Byetta problem is actually not the -- really it's a competent company, so their problem is not that they did not tell the specialists about the products, because they clearly did.

They started out that way.

Their problem is that even now, amongst specialists, the notion is that the efficacy might not be quite what they had hoped for.

And this is holding back, also among some specialists, the enthusiasm for Byetta.

We believe that this will not be the case for Lira because of the document that we [have].

But I think it's a relevant benchmark that, clearly, we should be able to match that benchmark you referred to in terms of specialists with having experiences with Byetta at launch.

The second question was regarding the growth hormone franchise, and the -- when will you start to see an impact from biosimilar competition in the growth among franchise.

And the reality, Jonas, as you are aware, is that we've had biosimilar competition already in the U.S.

with [BGT CUFO] for a couple of years and where they've been selling it at about 25% to 30% lower prices than growth hormone with very limited impact.

What you're also rightly pointing at that the average treatment period for kids of short stature could typically be a five to six-year period and, hence, it is very much decided upon initiation of treatment what brand you go for, and there is, hence, longevity in your current portfolio of patients treated.

We have not yet seen an impact from Sandos in the U.S., and they have chosen a rather aggressive pricing point.

My understanding is that their list price is some, almost 40%, below the price of our current product.

But do read that with a little bit of caution because one thing in the U.S.

is list prices; another thing is the actual price that you get in individual healthcare plan, and you agree with the healthcare plan what we basically give to them.

So the net rebated price may not have that big difference.

So that is one thing.

The other thing is you have to retain very committed to expanding your indications with growth hormone.

It's one of the areas that we work very deliberately on.

Going for a lot of minor indications, which enable you to have the continued right dialogue with the endocrinologists and create new science around a core product for their growth hormones.

And then, I think the final element which I alluded to in my presentation was that we have the advantage of having the only one -- the only liquid growth hormone, which doesn't have to be stored in a refrigerator, but actually can be used or carried along at ambient temperature.

And, of course, when you have to inject your kid almost every day, being able to bring it along wherever you go is an advantage, and then having it in the disposable device making it even more convenient.

It is an advantage.

It is not making the difference of the world but, in fact, it is giving us still some competitive edge.

The guidance we have given for the full year is a growth in the vicinity probably just a little bit higher than 10%, and you saw the first-quarter growth was 17%, so we are probably anticipating there will be a slightly more competitive market as we move into the second half of this year.

(Microphone inaccessible).

In the U.S., it can be changes in base plans.

No, I'm not aware of any significant changes in base plans yet, but I think it's a little bit early days.

And I think one should be a little bit cautious on the growth rates in growth hormone coming from this because, everything else being equal, this is a step-up in the price competitive environment in growth hormone.

And then the final question was related to the biosimilar competition, where you wanted me to make predictions about how the biosimilar competition is going to be on the modern insulins when they begin to expire, when we get to 11/12, and give you reassurance that life is going to be easy.

I don't think I can give you that.

I think it's uncertain yet.

I think what we can see from the current momentum in this conversion from the human insulin to the modern, that that momentum is very solid.

We can see that there is a continued movement towards pen usage.

We are having 95% pen usage in Japan.

We are having 92%, 93% pen usage in Europe.

We are seeing a significant growth in the U.S.

pen penetration, now approaching 20% pen penetration in the U.S.

So, following the launch in the U.S.

by Sanofi-Aventis of Lantus in a competitive pen device, we are seeing also the basal [effect] in the U.S.

now converting to more pen.

And, of course, that is very important for a leading manufacturer of pens, like Novo Nordisk, that we are seeing this U.S.

market which could be very exposed if it was only a vial-based administration market, but that is moving too.

So I think it is getting a little bit like it has been for the human insulins.

It will be up to us to continue to innovate in terms of delivery devices to protect ourselves against biosimilar competition.

So far, we have not had any clear guidelines yet in the U.S.

on how the insulin route is going to be for biosimilar products.

And I think we need to see those guidelines before we can really make more detailed judgments.

But I think the prime risk for us is going to be the U.S.

because of the high levels of vial-based Insulin administration there compared to the European product.

I think the key market which is going to off first is going to be the rapid-acting insulins and, of course, the rapid-acting insulins are the ones which cater themselves best for pen administration because you need to bring the insulin along to the meal.

So that's the prospective challenge that the biosimilar competitors are facing and are going to go up against.

And, clearly, it requires of Novo Nordisk to continue to innovate our pen platform and Mads is diligently working on that.

And maybe one comment from my side is that, historically, we have, if anything, seen more insulin competitors on the -- our generic side than we do today because, as you recall, the insulin patents from 1921 is around.

So ever since the second World War, human insulin kind of -- or insulin has been a generic thing.

And that means that many markets will have generics.

You mentioned Poland.

There is India, China.

The driving force are the things that Jesper alluded to; the quality of the products, the device and, moreover, the conversion to patented products.

The biosimilar guidelines from the U.S.

are probably not just around the corner, because I think the U.S.

system is right now preoccupied with certain other things; the election of the new President.

And the FDA Commissioner might not be in a position, actually, to adopt the biosimilar guidelines right now.

And for every year that passes, without such, it's the hope to (inaudible).

[Daniel] at Dresdner Kleinwort.

Just coming back to the gross margin again, I was just wondering is there any ceiling as to where you think your gross margin could go to?

I was just wondering how much further do you have on these efficiency gains.

Is it going to be years and years, or shorter?

And I don't know if you have, maybe, a three to five-year target as to where the gross margin could go.

I think the only period where we can have a meaningful transparency on our gross margins is the next two, three years.

From there on, I hope that Liraglutide will be an important component of our portfolio and, depending on what price is going to be selected, that could be an impact in the overall development of the gross margin.

But you also have to bear in mind the development in the portfolio of products where I mentioned that the Diabetes Care franchise is growing at a significant higher speed than the Biopharm franchise.

And I don't think there's anything in the discussions we've had today, both with NovoSeven or with growth hormone, as alluded to by Jonas, that the Biopharm franchise will be able to match the growth level we will see in Diabetes Care.

And, as a consequence, because the Biopharm franchise overall is a higher gross margin portfolio than we have from the Diabetes Care, there are some limitations to how high it can go.

It's clear that the Biopharm franchise is much more -- is a higher gross margin portfolio than the Diabetes Care.

I do believe that it's realistic that we can make improvement -- local currency this year in the 100% -- 100 basis point plus improvement.

Next year, and even 2010, I think it's realistic that we can do 50 basis points to 100 basis points year on year.

And beyond that, I don't think it's realistic that we should give guidance.

Can I just make a follow up on that?

From 2009, I understand that the Prandin patent will expire out.

Would we expect any one-off negative impact in gross margin from that?

It depends a little bit on exactly how it plays out, and there are some challenges surrounding that patent.

And we are also trying to have an approval of a combination of Prandin in the U.S.

with metformin.

So a little bit depending on whether we're successful with that, and at what point in time there would be generic competition, there could be impact.

In a worst-case scenario, yes, there could be an impact on gross margin.

I wouldn't expect it to be substantial, but it could be negative.

Sachin Jain from Merrill Lynch.

Just after a bit more color on where you are in your sales force thought process.

Are you at a stage of whether you hire or not?

Or is it more now along the lines of how many you're going to hire?

And if it is that latter, I just wonder if you could just remind us on the metrics of how many positions you're covering, (inaudible) those kind of stats (inaudible) I think they were referring to around 75,000 [adopts] in the U.S., or [8%] of high prescribers.

So just any color around that (inaudible).

The thinking process is ongoing in terms of the thought process on where we will go in terms of reps in the U.S.

We will take a decision on that within the next three months to four months.

I think it's highly likely that we will increase the number of reps in the U.S.

When we look at the Diabetes Care and competitive environment in the U.S., it is clear that both Sanofi-Aventis and Eli Lilly is maintaining a high dedication of reps to the Diabetes Care franchise and, hence, if we want to remain competitive within the Insulin landscape, beyond hopefully approval of Liraglutide, we'll have to maintain a significant sales force.

So, that can only leave you with one conclusion, that you need to add to your sales force to also be able to competitively launch CLP-1s or Lira.

And in terms of number of reps, I think it will have to be linked to both looking at your cover.

Currently, we believe the two [mirrors] that is targeting this, the high-prescribing GPs are reaching -- at least 80% of the high-prescribing GPs.

I don't have the specific number of physicians, but we are reaching approximately 80% of the high-prescribing GPs.

And, as a consequence of that, and if you follow Mads' train of thought that the CLP-1s will move towards -- further into the GP territory, and I think we are calling upon almost 70% of the high-prescribing OADs to GPs, then you probably have to increase the intensity of the reach with the GP sales force and then, maybe in addition to that, increase the number of mirrors you have.

So those could be some of the thoughts.

The specific number and how we want to do it, we will [revert] probably with (inaudible) on in connection with the Q2 release.

One should anticipate that the hiring of [new traditional] reps could take place in the final quarter of the year in order to have them trained and ready, and maybe even having visited some of the doctors with an insulin call before they go on a Lira launch.

But that would depend on the timing and how the process is for approval.

But we will time the expansion of the sales force in a way that should make us able to be ready if we have a smooth approval process.

And just a follow up, perhaps, being pedantic, but the 29 plus comment then, I assume that assumes -- does assume some hiring in the fourth quarter.

No, it didn't assume any specific number.

As we have not taken a decision on what number, then it would be kind of -- but I'm saying 29, 29 plus would involve -- I don't think it's going to be that substantial, the hiring costs in the final quarter.

I think it's going to be a quite attractive market, especially for our [recruit medical base] in the U.S.

John Reeve, S&P Equity Research.

One clarification and a question.

A clarification on Prandin; is worst-case scenario U.S.

and Europe going in '09?

And what proportion of sales of Prandin are now in this territory?

That's a good question.

Well, on the negative side, Europe is later and U.S.

is the first market with Ripaglinide patent expiry, but we have other patents, including, as you might be aware, use of Ripaglinide together with certain other products, such as metformin.

So it's not a simple only composition of matter of patent issue we're discussing.

That is one side of the coin.

The other is actually will other companies be able to (inaudible) [micropacunide] without, somehow, infringing certain of our IP rights.

So that's why.

It's not clear at this point that they are -- whether or not there will be the impact discussed by the U.S.

But Europe will be later; it's around 2011 ish.

Maybe Hans or Lars can help me on this one, but I think the U.S.

turnover of Novo [normal branding] is roughly half of the turnover.

And then there is a significant IO proportion of sales to this [branding].

So I don't think the European issue is one which is high on our agenda, so I wouldn't be too worried about that.

Do we have the distribution -- do you have the distribution on it?

130 North America.

130 in North America.

And --

(Inaudible) a bit more.

And how much in IO?

Around --

Around 25.

Around 40 in North America.

Around 25 in IO and the Western Europe.

And in China they also actually launched a copycat even in advance of the [originator] molecules back in 1998.

So, in spite of that, we are the number three or four brand in China, even though there is a copy of [micropacunide] on the market.

So with 2009 the issue is primarily related to the 40% in North America; that's the issue.

And I think we'll have clarity on that situation within six to nine months, but there are ongoing challenges of the patent ongoing in the U.S.

We have a patent which protects the combination use of metformin together with Ripaglinide, and that is what's making it challenging for others to go in.

And that's why we're also seeking a combination product which (inaudible) you could say.

Might I follow it with a question on your hedging success and your timing?

You've just booked, I think, 70m gains in Q1.

On the calculation of the ForEx impact that the operating profit lie in negative pain there was round about 300m.

You've got these mark-to-market gains of DKK1b.

I just wondered how much flexibility do you have on when you can book those gains through the income statement?

Do you think that you're more protected in the next three quarters than you were, perhaps, going into Q1?

The thing that happened for us in Q1 was that we suffered significantly from our commercial balances in non-hedged currencies, like the Brazilian reais, like Turkish lira and South African rand, and we had a significant hit in the first quarter from these currencies.

And that was why our currency hedge wasn't as effective as it has been historically.

If you assume, going forward, that we have stable currencies, then you will record these hedging gains in the subsequent quarters.

We have no flexibility in terms of the timing of recording those hedges, because the recording of those hedges are completely linked to the cash flow that it covers.

And that's why we give you very clear guidance on when is the cover period and, hence, you can, from the cover period, more or less anticipate where the hedging gain is going to come.

But, of course, the biggest hedging gains are early in the period because that would be where the -- the spot rate was much more attractive when you entered into the origin hedge.

The only -- I wouldn't call it flexibility, but where you have a different method is for the option -- when we purchase options rights to sell our currency at a given rate, there, we do not meet the hedging criteria and, hence, we have to mark-to-market them at the end of each quarter.

So there is a mark-to-market of the options.

The options currently constitute only one to two months out of the total hedging period, so it's a quite limited proportion of the overall hedge that is relating to options.

The rest is straightforward.

A very quick add on; if you're planning to take DKK800m ForEx hedging gains in the next nine months, doesn't that make your net finance projection for the full year look a bit light?

Sorry?

Doesn't that make your projection for net financial income for the full year look a little bit light if your hedge --?

No, because we're going to have the costs related to our share of the losses in ZymoGenetics and in (inaudible) dragging it down to current guidance of around 600 something.

Thank you.

It's Alexandra Hauber from Bear Stearns.

I think yesterday on the call -- I don't know who made the comment about Japan, that you're on a good track record with Levemir and that you're planning to take more than 50% of the Japanese long-acting market or so.

Because Sanofi said yesterday they're going to launch SoloSTAR in the second quarter, and I was just wondering whether that is projection of the more or less 50% of the long-acting market in Japan is through SoloSTAR, or whether there is still something you can do about that SoloSTAR launch in Japan.

And the second question, I just had a quick question on something you said, Mads, on the oral versus the GLP-1s.

You made a quick comment that orals, including JANUVIA, only have a limited life span in patients of one to three years.

Is that ex -- and you've mentioned JANUVIA here; and I was actually wondering whether there is now any data on longevity on JANUVIA therapy because that's what we're still waiting, for that data, to see whether PPP4 do actually have some good (inaudible).

Okay, Mads, if I deal with the Japan issue, what the -- the predictions we are making about the market situation for basal modern insulins in Japan is based on our knowledge, which includes an expected launch of a device.

It's not so that Lantus in Japan is not sold in devices, but it's not yet sold in SoloSTAR.

We still believe that the competitive set-up we have in Japan, the relationship with key physicians and the inherent qualities of our products in Japan will make it feasible for us to overtake Lantus in Japan on a 12 month to 18-month horizon.

Yes.

And, Alexandra, we were aware of the SoloSTAR launch in Japan; that's not that new, even though the -- officially it was only just indicated yesterday.

But my statement about the orals, it was kind of more of a generic nature, because when you have compounds that, unless they have truly huge modifying potential, which none of the orals that I know of have in humans, then basically if you have a 0.6, 0.7 ish HP1C reduction, then the predicted stay time on such a product will not be more than two years because of the natural evolution of Type 2 Diabetes, i.e., your incremental HP1C increase year over year.

The one where people actually tend to stay on the longest is probably metformin, not because they stay on it as they asked for the product which is, of course, one good reason, but also because metformin is more efficacious and seems to be relatively sparing compared to insulins (inaudible), [Scwartzer], [Libedisol], and metformin, as you know, can give, in diet failure, increments of up to 1.3% to 1.5%, which is clearly superior to what we've seen for glitazones and DPP4 inhibitors.

(Microphone inaccessible).

Yes, I do.

Mads, just repeat the question for me, please.

Yes.

So, the question is whether I -- quite frankly, Alexandra, the situation is that there are no signs in humans that mild elevation of GLP-1 levels by one and a half to twofold has any particularly positive impact on long-term [beta cell] functions at all.

Even for Liraglutide I have to be humble and say that, even though we have seven to 10 times higher levels of GLP-1, meaning that we are maybe six times higher than you achieve with a DPP4 inhibitor, we do not have proof to the pudding that, in man, that there is a longevity effect on the beta cell.

What we do know is, however, that Liraglutide, in the short term, has wonderful data on restoring first-phase reliefs of insulin, positive restoration and so on.

And that after one year's treatment we are able to maintain excellent control in the [Diabetes patient].

Okay, we'll just probably have time, Brian, for a final question.

Thanks very much.

Brian Bourdot at Deutsche Bank.

Jesper, I'd just like to ask you about the pricing environment for Diabetes Care, particularly for Insulin in the U.S.

Yesterday, Lars Rebien mentioned, and I think you've mentioned before on another occasion that you see that the pricing environment, with the ability to win price increases in the U.S.

market going forward, is (inaudible) much less and this was taken into account in your guidance.

Could you just please talk about the source of this pricing pressure?

After all, the competitive situation doesn't seem to have changed much.

In most of your segments you're only faced with maybe one major competitor.

Maybe there are some new devices?

Sanofi's launched a [pedra] and the (inaudible) but it's still small.

Or is it coming from managed care?

Given that the health economics argument for diabetes was still very strong.

Could you please talk about the pricing environment?

Thanks.

If you look at the price increases taken out on modern insulin the last two three years, there has been a general tendency to the annual price increases coming slightly down.

I think we are now looking at a 6%, 7% increase which was taken out on our modern insulins in January of this year.

And that was approximately a year after the last price [inc] we made.

The other -- the fact to there is, of course, -- you have to look at -- when you take this price increase, you have to look at the general inflation environment and you have to look at the environment in terms of what are the competitive alternatives that are relevant.

And, of course, the Insulins have now moved -- for the modern insulins, the cost of daily use, although it'll vary a lot between how much units of insulin an individual patient takes, and of course you have examples of very high -- obese patients taking very high volumes.

But the garden variety patients probably having a cost in the ballpark of say $4 to $5 a day.

Now that is getting very close to where you also see the JANUVIA, the (inaudible) of this world.

So there is, you could say, a more price similarity now between either having a late-stage treatment with an insulin or an earlier-stage treatment with an oral.

And I think that creates an inherent environment which, inherently, will put a dampening on the level of price increases that a competitor -- that a player in the industry can take out.

The other fact you have to bear in mind is -- and we discussed that a little bit on the growth hormone.

One thing is the list price increase, but the reality is what is the net [home take] you get following discussion with all of the individual healthcare plans; what level of the price increase will you have to give back in form of rebate.

So the actual impact on our actual prices we see is lower than the gross price increase that is being implemented.

But I think that -- that will probably be the comment.

And then the statements we make is in anticipation of the different regulatory environment also, as alluded to by Mads.

We believe that in 2009 there will probably be a different overall healthcare environment in the U.S.

and, hence, when we make prediction on gross margin which has [a] pricing assumption built in, we are making more cautious predictions as for the pricing environment in the U.S.

It's probably more going to look like an inflation, maybe just a slight inflation plus price adjustment, whereas, they have been higher going back the last four or five years.

But what has been done over those four or five years has been taking the price difference between the protein treatment of Diabetes compared to the tablet treatment, so I think it has been reasonably justified.

Final question, Sebastian.

Try again, Sebastian.

That's better.

Two quick ones for Mads.

Can you share with us any open label efficacy for Lira?

In fact, is [ability] beyond six months, or we should -- we have to wait for that?

And secondly, when might we see the first -- the new routes of administration for insulin and (inaudible) that you're working on right now?

Good questions, Sebastien.

Well, as you might recall, the open -- the extension of [BOTP] Phase II trial is in total two years, so it's 20 weeks.

And, thereby, followed a total of up to two years where, after one year, everybody's offered to go on Liraglutide, whereas, in the first year they stay randomized to whatever they were on; [Zenecal] or Lira or placebo until 12 months.

So, no, I cannot share any data with you because, first of all, we tend to -- even when we could look into databases and so on, for ethical and other reasons we actually tend just to let the studies run and then look at the data at the end of the study, otherwise, you're walking a very fine balance between what one efficacy should do and not do by looking at data.

So I don't have any data, but I'll be excited, just like you, once they come, I hope, in a good way.

When -- the other one, the all -- the alternative routes of administration?

Yes, for insulins which you're working on in [practical] right now.

We are talking that we are in actually relatively pre-clinical stages of research on all means of administering proteins, such as Insulin and GLP-1, where you combine protein engineering technologies to make it be resistant towards the hostile environment of the stomach with acid and enzymes in the gut whilst, at the same time, allowing this large molecule species to penetrate the GI, the (inaudible) area, and instantly [sustain] the circulation.

So, late research stage.

I will not comment more specifically.

We will comment as (inaudible).

Thank you very much for your comments.

See you after -- back in August for the Q2 results.

Thank you.